Daily Economic Commentary: Japan

[PipDiddy]

Ka-ching! The yen bagged a few easy pips yesterday when it gained against its pip pals despite the lack of report in Japan. Risk aversion in markets helped boost the yen, with EUR/JPY dropping by 138 pips to 111.22, an GBP/JPY plunging by 126 pips to 131.70. Meanwhile, the Greenback managed to sneak in 4 pips at 81.58 after reaching an intraday high of 82.07.

No reports are scheduled from Japan again today, but keep close tabs on the big NFP report in the U.S. at 1:30 pm GMT! USD/JPY is usually a good gauge of dollar sentiment since both currencies are low-yielding in nature and fundamentals plays a bigger part in the pair’s price action.

Good luck in your trades today!

[PipDiddy]

WEEEEAK SAAAAUCE! No two words can describe the yen’s performance better! It weakened against almost all of its major counterparts last Friday, with USD/JPY rising 62 pips to 82.20 and EUR/JPY climbing 48 pips to 111.70.

The Japanese press was on stealth mode last Friday, giving yen traders no data to trade. Let’s see if they’ll make some noise this week!

The main event to watch out for today is BOJ Governor Shirakawa’s speech at 3:30 am GMT. You know how policymakers love to drop clues about future policy moves, so be sure to listen closely to what he has to say. Japan’s economy hasn’t exactly been looking to sharp lately, with consumer spending just crawling by, so he might provide more insight on the situation.

We also have a set of tier 3 reports due today. The leading indicators report is due at 5:00 am GMT while bank lending, current account, and M2 money stock data are due at 11:50 pm GMT. Though individually, these releases may not have much impact on the yen, they may be able to get a reaction from the market if they all print similar results.

The reports to keep an eye out for this week are the economy watchers sentiment report and the core machinery orders report.

The economy watchers sentiment report, which is scheduled for release tomorrow at 5:00 am GMT, is expected to upgrade its reading from 45.1 to 45.6 in January. This report basically gauges consumer confidence and gives us an insight on possible future consumer spending.

Then at 11:50 pm GMT on Wednesday, core machinery orders data will be available. As a leading indicator of production, a strong reading from this report could provide the yen with a boost. Expect to see November’s 3.0% decline improve drastically to a 5.2% increase.

Now that you know what you need to know for the week ahead, go out there and make some pips!

[PipDiddy]

YEEOUCH! The yen was at the bottom of the food chain yesterday as it was preyed on by all of its major counterparts. Though its losses were limited, they were also broad-based. USD/JPY rose 13 pips to 82.31 while EUR/JPY climbed 35 pips to finish at 111.82.

If you had listened intently to BOJ Governor Shirakawa yesterday, then you would know that there is a possibility that the BOJ may step up its asset purchases if the economy doesn’t pick up soon. Basically, the central bank is saying that it will be ready and willing to act depending on how the economy performs.

In other news, just a few hours ago, Japan unloaded a set of tier 3 reports that failed to get a reaction from the market. Bank lending was down 1.8% year-on-year, the current account pretty much matched expectations at 1.56 trillion yen, and the M2 money stock grew 2.3% just as expected.

Perhaps we’ll get a bit more action when the economy watchers sentiment report comes out later at 5:00 am GMT. The report is expected to upgrade its reading from 45.1 to 45.6 in January. Though such a reading still lies under the “pessimistic” range, it still marks a significant improvement. Who knows, we may even see an upside surprise!

[PipDiddy]

The yen got a bear hug from traders during yesterday's trading. Aww, ain't that sweet? It reached a high of 81.77 against the dollar only to lose it all during the New York session, closing the day with a 4-pip loss at 82.35. Meanwhile, EUR/JPY ended the day 45 pips higher at 112.27.

I'm guessing that the improved market sentiment made the yen's higher-yielding counterparts more loveable than it. The dollar, on the other hand, had sweet, relatively optimistic words from some Fed members to back it up.

Perhaps the not-so-stellar lineup of economic reports yesterday also kept the yen from rallying.

We saw that bank lending in Japan continued to fall for the 14th consecutive month. The report for January printed at -1.8% following the -2.0% reading we saw in December.

The Economy Watchers’ Sentiment index which printed at 44.3 and disappointed the 45.6 figure that the market was eyeing, might have also been bearish for the yen, offsetting the positive vibes that might have come with the current account report.

The Ministry of Finance reported yesterday that foreign demand for the yen increased by 1.56 trillion JPY in December from 1.15 trillion JPY in November. Analysts had only predicted the account surplus to be at 1.55 trillion JPY.

Let’s see if the consumer confidence report due later today will be enough to help for the yen to pare its losses.

At 5:00 am GMT, the household confidence survey for January will be on tap and it is anticipated to post a modest improvement to 40.5 from 40.1 in December. Watch out for a better-than-expected figure as this could be bullish for the yen!

While you're at it, you may also want to gauge market sentiment. Remember that the currency usually rallies in times of risk aversion. Good luck!

[PipDiddy]

IGNORED! Yen traders didn’t seem to pay any mind to the couple of green figures that Japan released early in the day. In spite of positive economic data, USD/JPY finished hardly unchanged at 82.37.

Household confidence surprisingly picked up strongly last month, as the index doubled the expected increase and rose from 40.1 to 41.1. Keep in mind, the last time Japan recorded a rise in confidence was back in June 2010.

We also learned that machine tool orders picked up 89.4% year-on-year last month, up from 64.0% in December. Hmm… Not a bad way to start the year, don’t you think? If this keeps up, talks of additional stimulus may soon vanish.

Unfortunately, the string of good news came to an end a couple hours ago. Japan posted a disappointing core machinery orders figure. Machinery orders rose 1.7% in December, which is only a third of the growth that was forecasted. Still, this news isn’t entirely bad. It still marks the first increase in four months, and we’re also seeing signs of improving corporate earnings and business investment. There is hope!

The rest of the day will be quiet in Japan. In the meantime, monitor risk sentiment and any developments in the U.S. as they may determine USD/JPY’s destination for today. Good luck!

[PipDiddy]

Geronimooooo! The yen fell fast and hard yesterday as it failed to get a boost from the only report released. It recorded its biggest loss against the dollar as USD/JPY climbed 107 pips and closed at 83.30.

It could be said that the day didn’t start out well for the yen. Within the first few hours of the day, we learned that core machinery orders only rose 1.7% in December, just a third of the expected growth!

I suppose the simultaneous release of the CGPI, which measures the increase in price of goods sold by corporations, was able to counter the bad news a bit. CGPI recorded a 1.6% rise in prices, better than the forecasted 1.4% rise. With Japan constantly battling deflation, such an uptick is definitely welcome.

That’s all we’re getting from Japan this week… Japan’s off to an early weekend! It’s celebrating National Foundation Day today, so we may be in for low liquidity during the Tokyo session. That means be extra careful! Volatility can be pretty unpredictable in low liquidity situations.

[PipDiddy]

The yen’s moves on the charts were limited during Friday’s trading as Japanese bankers took a break to chug on some sake in celebration of National Foundation Day. USD/JPY ended the week at 83.46 after opening at 83.30 while EUR/JPY ended the day 17 pips lower at 113.06.

I wonder how market junkies will react to Japan’s GDP report when they get back to their desks today.

Earlier, it was reported that the economy contracted by 0.3% in the fourth quarter of 2010. The good news is that it was better than what analysts were expecting which was for a 0.5% contraction. The bad news is… well, the economy shrank!

Making it even worse is that the growth we saw in the third quarter of the year, which was initially reported at 0.9%, was revised down to 0.8%. Yikes!

With this, I guess it’s safe to say that the chances of the BOJ hollering an interest rate hike tomorrow in its monetary policy statement are as low as Forexgump becoming the next American Idol. And let me tell you, that guy just can’t sing at all! No offense bud!

Nonetheless, make sure you still stay tuned to the BOJ’s statement tomorrow because BOJ Governor Shirakawa may just say something that could affect the yen’s fate on the charts. Kapiche?

[PipDiddy]

Yen pairs' performance was as mixed as the reactions to the Grammy winners. The yen strengthened against the euro, ranged against the Greenback, and weakened against the pound yesterday. How will it behave today?

Today is a big day for the yen since the BOJ is gearing up to release its monetary policy decision later on. Of course, policymakers are expected to keep rates on hold as usual but make sure you stay tuned for the accompanying statement and the BOJ press conference. Hawkish comments could be bullish for the yen while dovish ones could force the yen to give way to its major counterparts.

Also due today is the tertiary activity index, which is slated to post a 0.5% dip. This index measures the change in value of services purchased by businesses and, as such, it serves as an indicator of economic health. Stay tuned for the actual figure due 11:50 pm GMT.

[PipDiddy]

Ouch! The yen took a nasty beating from most of its major counterparts, especially from the pound. GBP/JPY flew by almost 200 pips from its 133.57 open price while USD/JPY came close to the 84.00 handle. Will the yen have a chance to make a comeback today?

Even though the BOJ upgraded their growth forecasts for the Japan, their upbeat outlook for the economy wasn't enough to provide support for the yen. Not even their industrial production report, which printed a 3.3% increase for November, was able to keep the yen from dropping.

The bleak performance of the yen was probably due to the weak tertiary industry activity index, which printed a 0.8% decline for December. This was a few notches worse than the projected 0.5% dip.

Up ahead, Japan doesn't have any major reports on deck. Still, keep an eye out for the BOJ monthly report, which could shed more light on the central bank's future monetary policy stance.

[PipDiddy]

Boy did the yen have lady luck on its side during yesterday’s trading! Despite positive reports from the Fed, it still managed to snatch a 21-pip win against the dollar when USD/JPY settled at 83.16.

It was also able to bag 57 pips from the pound when U.K.'s employment reports came in worse-than-expected and BOE Governor Mervyn King sounded more dovish than expected.

Traders think that its win against the Greenback was quite bizarre though. Note that the pair usually moves alongside bond yields. But yesterday, it didn't. So if you're thinking about rooting for the yen, you may want to be extra careful because a few market junkies expect USD/JPY to align with yields soon.

Also, on the economic front, we have the final leading indicators report at 5:00 am GMT. A figure better than its previous 101.4 reading will probably be bullish for the yen, so keep your fingers crossed for that!